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TOP FIVE THINGS YOU DID NOT KNOW ABOUT IRS FORM 1099-K

 The forms in the Internal Revenue Services’ 1099 series help taxpayers declare all the payments they receive in one calendar year from sources that are not a paycheck. Consequently, one variant of 1099 is the IRS 1099-K form, which helps independent sellers report income from ‘payment card and third party transactions.’ Unfortunately, many people, especially those who sell items on eBay as a hobby or side hustle, are not too familiar with the 1099-K; thus, they get in trouble and have to pay penalties and dues to the IRS.




ARE YOU ELIGIBLE TO RECEIVE 1099-K?


On March 11, 2021, the IRS changed the tax laws, and the threshold for receiving Form 1099-K from various selling platforms was lowered. So, do not be surprised if you see a mail with Form 1099-K in the 2023 tax season. If in 2022, you received any payments from payment card transactions (Credit or debit cards) or in settlements of third-party network transactions (PayPal, Venmo, etc.) that exceeds USD 600 will receive the IRS 1099-K form. It is noteworthy to highlight that the benchmark has been reduced from USD 20000 and 200 transactions in 2021 to USD 600 and no transaction threshold in 2022, quite the difference. 


Previously, the annual proceeds of many sole proprietors would not exceed the USD 20000 and 200-transactions limit. However, the dramatic alteration is an attempt to help close the USD 1 trillion in taxes that go uncollected yearly. Now that we know about its fundamental aspects, let us look at the top five things you might not know about IRS 1099-K form.


FIVE THINGS ABOUT IRS FORM 1099-K THAT MAY SURPRISE YOU


  1. 1099-K form is an informational return, as we do not use it to file taxes. Instead, it provides information to complete your tax return for the previous year or confirm the reported information.
  2. Form 1099-K is generally used to ensure tax conformity by matching the 1099-K figures to the business income reported on Schedule C.
  3. The Form 1099-K, also known as Third Party Network Transactions or Payment Card, is a IRS tax form of one-page long with five copies: Copy A, Copy 1, Copy B, Copy 2, and Copy C.
  4. Taxpayers do not fill out or file the 1099-K form. Instead, it is the payment processor, such as PayPal, Venmo, Stripe, etc.) that issues the form for all third-party network transactions that exceed the USD 600 mark.
  5. The third-party network transactions under Form 1099-K apply only to business transactions, not personal payments. You can use the features to differentiate between personal and business payments on sites like PayPal and Venmo so that the platform categorizes your transactions correctly.

 

WHY DO SOLE PROPRIETORS NEED AI-POWERED TOOLS TO DEAL WITH FORM 1099-K?


With the recent changes in tax laws, a massive cohort of sole proprietors will now come under the purview of IRS 1099-K form. The process of handling the process can be overwhelming, especially for novices. In such a context, AI-powered financial tools like the Flyfin App come to the rescue. Its CPA team ensures a 100 percent accurate tax return for you to stay out of financial losses and personal stress.


Also read - ALL YOU MUST KNOW ABOUT 1099 TAX 



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